Japan's old flip-phones soldier on while smartphones shrink

A pedestrian holding her mobile phone walks past an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo October 20, 2014.Yuya Shino

TOKYO (Reuters) - Japanese shipments of traditional flip-phones rose in 2014 for the first time in seven years while smartphone shipments fell, highlighting Japanese consumers' tenacious attachment to the familiar and typically less expensive older models.

Dubbed "Galapagos" phones because they have evolved to meet unique Japanese standards and tastes, flip-phone shipments rose 5.7 percent to 10.58 million in 2014, data from market researcher MM Research Institute Ltd shows. Smartphone shipments fell 5.3 percent to 27.70 million, down for a second year.

Users in Japan pay some of the highest smartphone fees among developed nations, the telecommunications ministry says, while flip-phone rates are among the lowest. Many Japanese accustomed to years of deflation are content with old-style flip-phones offering voice calling, email and in most cases basic Internet services.

Japanese electronics companies Panasonic Corp and NEC Corp have pulled out of the consumer smartphone business, unable to compete with dominant brands Apple Inc and Samsung Electronics Co Ltd. They still make flip-phones, though, competing in a crowded market with Fujitsu Ltd and Sharp Corp, among others.

But with a mobile penetration rate of 98.5 percent, or 125 million subscriptions, there is little scope for significant overall growth in Japan's mobile market, MM Research said. "Smartphones are also peaking in terms of functionality and they tend to last a long time as well, so there are fewer renewals," said MM Research Executive Analyst Hideaki Yokota. He said 2014 was a particularly strong year for renewals in the subscription cycle for flip-phones, suggesting that last year's growth may not be repeated this year.